20 April 2012

Triumph of At Will

It’s been a long time since I worked a regular job; mostly I’ve been a consultant, a small-business owner, a free-lancer. (Some of these gigs paid better than others, while some didn’t pay at all, but that’s not the point.) Only yesterday did I realize something about employer-employee relationships in the US. Per Wikipedia:

At-will employment is a doctrine of American law that defines an employment relationship in which either party can break the relationship with no liability, provided there was no express contract for a definite term governing the employment relationship and that the employer does not belong to a collective bargaining group (i.e., has not recognized a union). Under this legal doctrine, any hiring is presumed to be “at will”; that is, the employer is free to discharge individuals “for good cause, or bad cause, or no cause at all.”

At-will employment has been the norm in this country for more than fifty years. The United States is the only major economic power in which at-will employment is the rule rather than the exception. Other countries stipulate that workers can be discharged only “for cause,” though I understand that in the UK redundancy and outsourcing constitute cause. In the US, you can be fired merely because your boss doesn’t like you, or because you don’t agree to changes in working conditions, reduction in working hours, or reduction in pay. Some companies maintain corporate policies specifying acceptable causes for dismissing workers. Unions typically include a “dismissal for cause” clause in their labor agreements with employers. Otherwise, companies rarely deviate from at-will employment arrangements, with the notable exception of high-level employees.

After finishing grad school I worked as an employee for three different companies. In each case I held a high-level position. I don’t recall negotiating a “for cause” clause into any of those employment agreements, but I suspect that they were already in place — the bosses have each other’s backs.

The only reason I’ve become alerted to the triumph of the “at will” provision is that Anne is being subjected to it. For two years she’s been working as a volunteer for a non-profit startup that provides overnight shelter for homeless people. For a year she was Chair of the Board, stepping down only last month. She’s focused much of her effort on putting together a short-term convalescence program for homeless people being discharged from the hospital or the emergency room — people who would otherwise be back on the streets recovering from surgery or fighting a virulent infectious disease. Anne ran a pilot demonstration project, raised some grant money and contributions, and negotiated a contract with the local hospital to pay for this program. In other words, she has put this whole program together from scratch. Now she’s wanting to get paid. The new Chair is an asshole a guy whom Anne brought into the organization about six months ago. He’s an attorney, so he’s been useful in establishing policies and procedures and so on. But he spent most of his career as a corporate counsel, advocating on behalf of investors and management. So when he writes up an employment contract for Anne he inserts the “at will” provision as a matter of course. Anne begs to differ and won’t sign; the Chair says she’s being “uncooperative.”

I tell Anne that she should invoke the high-level position exception for herself. But she wants to replace the “at will” provision with a “for cause” clause that would apply to anyone hired by this organization, which mostly includes homeless people working part time for minimum wage. Sheesh, what a do-gooder!

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There are actually positions in which the at-will clause works in the employee’s favor (mine, for example), but it sounds like Anne’s isn’t one of them. It’s annoying how often these things are considered “boilerplate”, and how any questioning of the contract on the part of the employee is considered rocking the boat.

There are a couple of things that make Anne’s approach seem wise to me. First, she’s in a position of being key to a small developing organization, which gives her more leverage than she’ll have later on. Second, she’s addressing an issue at the very beginning, before there’s a long history of contracts with particular clauses. Third, she’s using a position of (relative) power to do something positive for people with less power in the situation.

I’d give her one piece of advice, which she probably already knows: Always know in advance how far you are willing to go in the negotiation, and always know in advance what you’re willing to give up.

I passed on your thoughts, Asher. I’d presumed that the employee can always walk away without cause even if that right isn’t reciprocal. Why is that fair? It seems that the employer always has more leverage in the transaction, but again, why? Is capital really worth more than labor even when the market establishes the exchange rate between them? Is that why capital is able to collect a profit on labor? I don’t have these things worked out on any theoretical or empirical basis. On some visceral level it just seems fair to be able to quit a job for one you like better or that pays more, but unfair to be able to replace a worker for one you like better or who costs less.

The at-will rule does not apply for fixed-term contract employment. I presume that restriction is reciprocal: the worker can’t just walk away if s/he has signed on for a particular stint or for completing a given task. That seems fairer to me than open-ended work for a salary or an hourly wage. Again, I can’t say why.

When I used to hire people I would never have fired them without just cause, with incompetence and sloth leading the list of unforgivable sins. I didn’t much care if they were assholes. I did regard the cause as just if there wasn’t enough money coming in to pay their salaries. They were going to leave before I did, even if I was the one making more money.

I guess the situation I was thinking of isn’t truly “at will”. I was thinking of a fixed-term contract in which there is a provision that just cause is not required for termination of the contract. This kind of thing is good for the employee when they’ve received an up-front lump sum, or when the project they signed on to complete would be put in jeopardy if the employee left (really, any situation where the employer would be inclined to sue the employee for damages).

I’m pretty unclear about where my own sense of fairness comes from. The more I think about it, the more complicated it seems to be. A lot of it probably comes down to the fact that I have a harder time feeling sorry for a company than I do feeling sorry for an individual person.

That sounds like a pretty sweet deal. Sometimes deals actually do work out for the benefit of the worker. Once one of our consulting clients had money left over in her budget at the end of the year, so she paid us up-front for unspecified work to be performed in the following year. The months passed, we kept asking her what she wanted us to do, until eventually she got transferred to a different department. We never did have to do any work, but we got to keep the money. Kind of like winning the lottery. It was a pretty good chunk of change too — $55K if memory serves. Lord, where did that money go?

So here’s what Anne decided to do: The next phase of work involves ramping up infrastructure so that operations are ready to roll once the hospital starts paying for services. She figures that it will take her 5 or 6 weeks to get this work completed. Instead of signing on as employee, she proposed to do this phase as a consultant, with a specified list of deliverables to be accomplished by around the end of May. Again the Chair didn’t like it. Again, the fixed-term contract limits his options to get rid of Anne, which is particularly ridiculous since for two years she’s been busting her ass for this organization for no pay.

But I suspect that another issue has to do with intellectual property. No doubt this is a routine consideration in your work, Asher: the client owns the completed work, but the consultant owns the ideas, subroutines, and so on that were used to complete the work and that the consultant can reuse in subsequent gigs for other clients. In contrast, as an employee all of your work belongs to the company. I suspect that the Chair might want to build some sort of turnkey product to roll out in other towns, or else he’s afraid that Anne wants to do so, quitting the organization and going off on her own. Not surprisingly, the Chair tells Anne that a consulting relationship “isn’t appropriate.” So yesterday Anne wrote an email to all the Board members — which still includes Anne — telling them that she’s going to start the work as consultant immediately, with the assumption that a mutually acceptable consulting contract can be worked out. Bearing in mind your caution about how far she’s willing to go, Anne decided that if a contract cannot be worked out she’ll do the work anyway, without pay — after all, she’s been doing it gratis for a long time now. And then she will retain ownership of all of the work, including the deliverables. In her correspondence with the Board, Anne says that she wants all of the programs, materials, organizational designs and so on that her organization develops to be made freely available to other organizations as “commons.” By just going ahead and doing the work she can exert more leverage in that conversation.

Not only is it a routine consideration, it’s the crux of the deal I made. My client wanted to own all of the code I produced for them outright — I can’t re-use anything I do for them in future projects (without their permission, anyway). Normally, my ability to re-use (re-sell) code would would allow me to charge the client less — so that became a point of pay negotiation for me. And since they own all of my work products, my ability to terminate the relationship mid-contract wouldn’t be as big a problem for them. It all works out. But in the end, I don’t think a deal like the one I have would be possible if there wasn’t a decent amount of trust on both sides.

I really like Anne’s approach. I hadn’t even thought about the IP aspect of her situation, but her attitude about making ideas and techniques available to other organizations is really admirable. And besides knowing in advance what she’s willing to do, she’s also doing something else that’s really important in negotiations: driving the conversation. No matter how the Chair ends up reacting, he is forced to react in terms of what she’s already doing. The train is leaving the station. He can stand there or jump on board, but in either case, he’s reacting.

You’re right: trust is crucial, and it was the first casualty of the Chair’s draconian contract language. It seemed to Anne that the work is more important than the formal arrangements; now she has to be simultaneously more self-protective and more aggressive. I agree that it’s a good move for her to get the train rolling toward the destination instead of waiting while the lawyer tinkers endlessly with the timetable. And you’re right again: I did luck out.

The main reason why intellectual property might come into play here is that the program potentially saves money for hospitals. We live in a land of private for-profit healthcare, so a lot of people are out of luck if they get sick or injured. But the hospital looks bad when they dump some indigent patient out on the street — it makes the big donors less likely to contribute to the new state-of-the-art cosmetic surgery wing. Doctors, greedy bastards though they may be, are still professionals who practice in accord with a code, so they typically refuse to cooperate with hospital bean-counters who want to refuse treatment for uninsured patients. So the hospital is interested in finding a cheaper alternative to admitting uninsured patients. Homelessness complicates even ordinary admission/discharge decisions that aren’t directly motivated by money. Sending someone home for bed rest after back surgery doesn’t work so well if there is no home and no bed. So the hospital either has to keep the homeless patients in longer, or the discharged patients must be readmitted when their condition worsens. Even if a patient qualifies for Medicaid, that program doesn’t cover convalescent care.

Homelessness is on the rise in this new Gilded Age, and with political pressure to cut Medicaid there will be even more uninsured people. Imagine how Blackwater or one of those for-profit prison companies would sell and manage this sort of short-term convalescence program to maximize return on investment on a national scale. I think the Chair can imagine it.

Obama keeps talking about how “America” should be. There is an assumption about the social contract that makes up the fabric of that dream, but then that ‘contract’ does not seem to really exist any more, or it does but only in people’s minds, which makes it a powerful political sell. The reality is the contract has been broken.

Anyhow, best of luck to Anne! It’s a worthy cause. Perhaps individuals can make a difference for the have-nots.

Obama made a stop here in Boulder today — here he is posing with a college girl at a local pub. I’m not really sure what else he did while in town, but I’m fairly sure that Anne didn’t hear from him. I’ll pass on your best wishes to her, Sam.

Obama was back in Boulder today — this time he ate at a different local eatery, The Buff, before giving his speech on the U. of Colorado campus. He must like it here; certainly Boulder is the most reliable Democratic stronghold in this state. He said that, watching people drinking mimosas and bloody marys at brunch, he could see why people might forget to vote. He’s a good stump speaker, seems to enjoy himself.